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Renewal of a Commercial Lease and the Doctrine of Waiver

Once a party waives an enforceable legal right its ability to then enforce such right is not immediate.

The Case

A recent decision of the Court of Appeal reaffirmed the manner in which a party may revoke its waiver.

In North Elgin Center Inc. v McDonald’s Restaurants of Canada Limited, the parties had entered into a commercial land lease agreement for a period of 20 years (the “Lease”). The Lease was subject to renewal. The parties agreed the Lessee, McDonald’s Restaurants of Canada Limited, had provided its written notice to renew the Lease within the required period, however, the parties continued to negotiate the rental rate after the deadline to set such rental rate pursuant to the renewal provisions of the Lease.

The application judge held that through such negotiation the Lessor, North Elgin Center Inc., had waived its right to enforce the strict terms of the renewal provisions in the Lease. The application judge later found that the Lessor’s waiver was revoked by an email sent by the Lessor to the Lessee.

The Court of Appeal disagreed.

The decision emphasises that to be effective, revocation of waiver requires:

reasonable notice to be provided to the receiving party;

the notice to include a clear indication that the party who granted the waiver will insist upon the strict enforcement of its legal rights; and

the receiving party to be provided an opportunity to cure any defect resulting from its reliance on the waiver.